Transcription
Another all-time high. But what's going on under the hood? We had a lot of rotation today. I do like the way that these wicks are then acting as springboards. Take a look at the NDX. Much stronger than we anticipated after we had this dogee and then the lift. What's got me a little concerned is the breath. We can see all four major ones are rolling over, but I want to focus on one for a second because I think it's telling us more of a story than the others.
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Now, I do want to just say something. I do appreciate the subscribing and and clicking and the sharing. You guys are sharing these more than usual and I think that's because of what's going on there. But for those that don't know or newer to this channel, I just want to go through this. This is the S&P 200, 50, 20, and five stocks that are above those percentages. And it's important to get that. So, in other words, if you're above the 200 day, what percentage? 50, 20, etc. We've been talking about this divergence, but I just want to focus on one for a second because I think it's telling us a story. And when it speaks, I do listen to it. I want to be really clear about that.
So, if we take a look at the 50 line, we're just going to drop the 50 right here for a minute. And then what we're going to do is note that every major kind of top or where we were more susceptible happens when we break 50%. We are below 50% and we've been for some time. It is not an all-out time to sell because of that, but it does mean that the foundation that we're built upon is getting weaker. And if you look at the market, some of the leaders you're starting to see that with now we're rotating and can that rotation keep us up for a little bit, but then we need to see the leaders come back and well lead. So, we're going to get to that in some in a minute here. But what I don't want to see is I don't want to see the breath of this getting worse. You can tell if the breath of this is going to get worse or better by looking at the 20 more than anyone. you if you want to see if the one is going to get worse, you go to the next shorter time frame and then you can tell. For example, if I wanted to see if the 200 was going to get worse, I would look at the 50 and so on. If you want to see if the 20 is going to get worse, you would look at the five. You can see that the five is starting to slow a little bit, which means the 20 might slow, which means the 50 might slow, but of course it would take time. But for our purposes, noticing that the 20 keeps dropping. This is a problem and it needs to catch.
Now, just so we're clear about what we're looking at the data here, let me just show you this so that you can see exactly when it is because sometimes that data is not there, but that is Thursday. So, we do have like an uptick, which means I think we got one or two more names. Nothing great, but we're not really seeing that broad-based rally here, which means the foundation is getting weaker.
Now, if we overlay this before we get into some of these names and we take a look at the NASDAQ. Now, the NASDAQ, anyone would look at this and they would be giddy, right? They'd be doing cartwheels. Let's get rid of the V for a second. What's starting to happen here is we're starting to get a frozen rope. And frozen ropes are when you are have a very tight up pattern and you're just waiting to have one of these guys wake you up. The long red bar of death, as I like to call them. So when you have a frozen rope pattern and this it's not perfect. No, you had it in here, you broke down and you reversed and that usually means you're going to go higher.
Now the one thing I just want to point out with this before we go any further is on the daily where we are up there. We are in the 80s, it makes us more susceptible. It doesn't mean you're going to crack. You don't hit 80 and then that's it. But when you get up here, it gets more susceptible. What we never want to do is just assume. Never assume because when you get up in here, most people will say, "Oh, well then it's overbought. I got to get out." You'll miss the majority of the big moves. If you're doing that, if you get out just cuz you hit 70. Now, you want to look and you want to wait till you're crossing below that and then see how it acts from there. One of the things you can do is go to the 4 hour and start seeing how that's shaping up.
Now, if you look at the 4 hour here, we can see the peak here and we can see that that's lower. So, we're starting, it's not there, but we're starting to get that divergence. If you want to just look at it from this perspective, we're going to get rid of the pre and the post and just go to the cash market. You're going to note the same thing. It can absolutely bounce off this, act as support, and then go up another leg higher. That is possible, just like it did here. Bounced off that level right here. And then from there, it just pushes and goes higher. If the breath flips, that can happen. So, we want to be really cognizant here of not just saying this means we're going to crack. We want the market to tell us what it's going to do. We don't want to tell the market.
So, when I look here, I'm going to get rid of the RSI now. And we're going to look at something called NDFI stocks above the 50-day moving average. And we're going to see that they are getting weaker. And this is at 50. We do not want both of these below 50. Why? It means the foundation that we're standing on does not have a as strong of a foundation and that means that we're more susceptible to watching things roll over. So what I tend to do in environments like this is understand that and I become more aggressive with trimming out of trades versus position building. So, in these types of situations, it's not that I won't trade, it's just that I will trade around the position a lot faster and pull money out and pull out faster of a name. I'll give you an example of what I mean in a moment here. But when we see this kind of thing, it changes and I do want to talk about this rotation. So, when we see this thing, we just want to be cognizant of it.
Now, one of the things that I've been showing people is S5FI and that is stocks above the 50-day. And then we want to take NDFI and we divide the two. And what we don't want to have happen is we really don't want the S&P to be leading the NASDAQ on the breath. We want the S&P to always be worse or dropping comparison or the NASDAQ to be climbing faster than the S&P. If you go and take a look at these peaks, for those that have watched this, they know this. This is where you're going to see bottoms as my niece says. So, what you want to refer to here is just go overlay this with the chart. It'll take you two seconds and you can see it for yourself. But that's the bottom of the chart and you'll just kind of note these areas. It's not rocket science. We are starting to curl up. Is it a major curl up? No. But let's not get it twisted. There it is. You know, as the hip kids say, let's just let it cook and then we'll figure out what it's going to do. But we don't have to tell it what it's going to do. Let it tell us. and then we can act on it. But when I get in these environments, I definitely tend to move faster.
Now, if we take a look at the market as a whole, we talked about this yesterday and it really played out pretty perfectly. We talked about the socks and how the socks are setting up to break out, this little pullback, and then how you're setting up a flag. But we said, "Oh, well, it must be ASOC that's breaking out." No, we were looking at ESOCS. Here's what they're doing. They're rotating you within sectors and they're doing a heck of a job. And that rotation throughout sectors is actually what's keeping us up. So I'm going to say that again. They are rotating throughout the sector. So we're looking at the socks and go, it's not going anywhere. What they're doing is they're rotating the names. So in other words, you'll note things like Texas Instruments. Well, you didn't really move today. ADF, well, you didn't move today, but the day before everybody had to be in there. Well, ASOC is lifting. All right. Well, what are the two major names in there? AVGO closing all-time high. Nvidia closing all-time high. So, they are rotating within the sectors. This is a really important concept because once you understand that there are sectors and then there are subsectors in there that are rotating, it makes your job as a trader a lot easier. And then if you overlay what I just said with the fact that you have very weak breath in the market, then what we want to do is overlay that and say that well then that means I should probably be scaling out or moving my stops up a little faster.
So here's a great way of looking at it. So this was a trade we did exceptionally well with it. We had an option trade on it. I walked through it yesterday. We rolled the options up twice. We bought the 170 calls. Very fortunate they doubled. 190s doubled. rolled them up to 200s and then they hit and we had stock. If I looked at this chart just on a daily or on a 4 hour on a swing, I probably don't really want to look at any less than, you know, that than that normally, but take a look at this. When you look at the hourly and what happened today, if you take a look at this after we lift it up one, two, three. Now, what would bother me about this? I guess we'll do a little education here. Now, what would bother you about this chart? Well, the first thing that you would look at is every single one of those hourlies got what? Smaller. So, every single one got smaller. And then what we would say is, well, that's normal that they're going to get smaller as the day goes on. Okay, fair enough. Then what do you see happen? Well, the volume drops off. Well, the volume drops off, but what we have to focus on is this. That's the first bar of the day. Yep, that's true. That's the first bar of the day coming off of it. We'd have to focus on that. Well, up one, two, three. Well, that bar encompasses that one. All right, this is where it gets interesting. If we take a look here, we could probably take this off real quick. Now, all I've done here is reduce all my little standard deviations to take them off that change the colors. But if you look at the hourly here, what's transpiring? Well, we're starting to flip. And you could make an argument that, well, we've done that in the past, but this was different. And it was different for a reason because you flipped and you have accelerating volume at the top of a chart and that bar encompasses. So we want to pay attention to the difference of that. When you're up here and that bar encompasses that bar, you're getting a bearish engulfing. This is actually setting up to the three bar patterns that come up and you know you have those um bullish homing pigeons. This would be a bearish one actually the way it pops over and then undercuts. But it doesn't matter what you call it. and call it a blueberry for all I care. But when you start to see this stuff, you want to pay attention to it because you got rid of all of the previous hourly. And then if you look at this bar, I don't know if it was perfectly 50% or not. Yeah. So, it got rid of all of that bar and 50% of the previous bar. So, that's telling you that you just got rid of 90 minutes worth of work in an hour, which means you're accelerating to the downside. You can start saying it. that's really not enough to get me out of a swing. But when I have a dogee sitting here and at the end of the day I watch the selling, that's enough for me to trim. So if I'm buying in here on a swing on a day like that, I will trim that. You should do what you're comfortable with, but I don't need to go for a ride.
Would I feel the same way if we were in a market that was just breaking out? So in other words, and let's just go full circle. So if I'm here on the market and I have that, I'm not concerned. If I'm here going into a Friday option X, yeah, I'm a little concerned about that. So, I tighten the stops and I become more nimble and what I want to do is look for where those call walls might be and then sell into them and go from there. I don't want to play games.
Case in point, circle today was one that we traded and then what we did here, I actually was surprised that this didn't move more. But on that news, I thought that news would have been it. If it doesn't get that through peak VWAP, I don't know what will. But we we bought this and I'm not going to pull the time stamps today just for time sake. And as we're trading into this, I I'm trimming pops, trim, pops, trims into it, trim. Like I'm I'm not waiting around for that, right? Pulls back, tries to rally, can't. There becomes your stop. That's it. Trades busted, right? I actually raised the stop a little bit more than that, but I'm not playing around with this in this kind of market. So, what what changes here? I'm very ruthless with my stops uh in general, but in markets like this, I'm just brutal. I'm out. You'll just they'll hear it all the time in the community. I'm out.
And if you're trying to get in, there's 4 days left. If you're on the wait list, and I did send out uh a reminder email uh tonight to those that were invited. Um, if you're interested, get in because I am probably going to close enrollment for the month of June just because it's going to be a pretty wild month because I think you're setting up for massive volatility here. So, let's get to some things that I think could really help you.
And so, the first thing that we would look at is what's the dollar doing? All right. Why is the dollar breaking out after this? Why do we have a strong dollar right now? Well, the China US, the way that that went is leading us to a strong dollar. Whether you think it went well or it went >> partially filled. >> Some people think Thank you. >> Order filled. >> Thank you, little British guy. Some people out there, they're looking at this and saying to themselves, "This went strong. This is going to be strong for the dollar." And then they're going to take a look at it and and go from there. And I say, "Okay, so what does that mean?" It means my silver position might not be as strong as I thought, right? When weak dollar leads to strong silver. So, you're getting these movements that you've had in the past that were looking to be profitable and now you're having these macro trades that are not working the same way. You'll remember earlier in the week we talked about some of these macro trades and how they were playing out. You know, the biggest one of all that we walked through for you guys and I really try to hammer this stuff on Saturdays for you and then we, you know, we follow the we follow how it plays out right or wrong into this market. But if you go and take a look at Tuesday here at 1:00 and you go and take a look at Wednesday, we'll go find Wednesday at 1:00. Hold on one second, guys. No, I'm not classically trained. I just have that the gift of song.
So, if we take a look right here at 1:00 and here at 1:00, you would go back and you would say, "Why did we do that? Why' we lift here? And why' we reverse here?" This was your 10-year bond auction. This was your 30-year bond auction. This was after a dumpster fire of a CPI. This was after a dumpster fire of a PPI. That PPI was god awful. And so it's telling us that they're still on that equity risk premium trade and buying on these spots. And you can go overlay this with the the 10-year and everything else. So they are buying those areas. So you have that macro trade. It's just a function of how technical that macro trade's going to get. But as I was explaining the other day, they're rotating consistently rotating through the sectors.
So when you look at something like IGV, for example, people would go, well, IGV is holding. This is setting up, so we should really be setting up to push. Well, one of the things that I've been trying to explain to people is, yes, that's the case, but there are subsectors within software, right? So some people might say, well, I'm going to buy the beaten down ones. Don't do that. Right? You want to look at the ones right now. When you have weak breath market, you want to look at well, you should do what you're comfortable with, but when you have a weak breath market, when the breath is weak, that would be defined by what you you saw earlier. You want to look at the leaders and play the leaders because they're going to chase those. And then what we're doing is having core or trading positions, trailing stops, and then moving the other piece up with it. Eventually, we get clipped out and we go from there. If it goes higher, great. Good for it. But what we're doing is we're being super protective. So you might want to listen that part again.
So when we start looking at something like IGV, what do we do with it? Because it it looks good. I mean, it does look good. If we overlay it here with the RSI and the weekly watch, but wait, there's more. So you can see the low here on the RSI. Then you can see the higher, right? Look at it right there. And now we're here. Well, what does this mean? Well, that means that we've probably bottomed. And we've gone through this, right? We've talked about this with where we're at in this level. Well, that's great. Yes, we're holding that 200E moving average. What's the more important thing? The subsectors. And what we're seeing is this huge, huge push in cyber security. Now, these are names that we've been talking about here for some time and they're names that in the community that we own, PW, right? We've talked about this at Nauseium, how these names are just absolutely ripping because they were dead wrong on what they thought was going to happen with AI. Remember, AI is telling people to walk to a car wash. So, we're probably not going to give them my cyber security of my, you know, multi-conglomerate business to run at this point.
If we go and take a look at Crowd Strike and people say, "Oh, it's going to get better." Well, everything's going to get better. Clippy was supposed to get better, too, right? So, if we look at CrowdStrike, all-time highs, and I joke, I use AI all the time, but I I'm still not going to have it do all my cyber security, and I don't think anybody is. So, once reality started sitting in with these companies, I think that you have to look at this stuff and say, well, this is the sector that you want to be in because that's the sector that's breaking out. You do not want to reinvent the wheel. And what I would say to people is the same thing that I've been saying. You want to buy the winners.
If you start looking at Rocket Labs, Rocket Labs has gone from 80 to 132. It's exactly what we walked you through on Saturday's video. I know people will go be looking for the second one like as was lifting today. I'm not saying that that's not going to work. That's a significant hold here after all that selling at that 200, but you're not going to outperform this. You haven't. You haven't even come close to outperforming this. And I want to show you really quickly how you can see the the difference on these names. So all you have to do is take a look at something like Rocket Labs and then just divide it by ass right and you can just see the difference and then just go all right from that base what's the difference. So the difference between buying the right name and the wrong name right now okay in this case was what 134%. That's the difference between being long Rocket Labs and short a doing the exact opposite. And it's not just there. You could do it with let's take a look at Crowd Strike and Microsoft for example. And you'll see it here as well. And these are in the same se same sector. But when the breath gets like this, you want to be really specific about the names that you're buying because it makes all the difference. That's it.